(*This was originally posted on October 9, 2009 and I have updated it, September 1st, 2010 in light of Michel Fortin's post that many of the internet marketing gurus are not selling information, but rather are selling business opportunities. Thanks to Workathometruth for the link.)
This is a post designed to show the interactions between:
a) an internet marketing program,
b) the FTC new rule on testimonials;
c) a particular State business opportunity rule, in this case, the California "Seller Assisted Marketing Plans" Act.
Paul Schlegel, who writes a very useful blog, called WorkatHomeTruth, has wondered why nobody by me, apparently, is pointing out that internet marketers of their legal liabilities and responsibilities under the US State's Business Opportunities Acts.
Most of internet marketers have also misunderstood the FTC's new rule on testimonials and the removal of the "safe harbor" for representations that are a) out of the ordinary, and b) for which there is no typical consumer information available. The new FTC rule, in effect says, no typical consumer information about, say, earnings potential, means that you cannot suggest any earnings potential.
I have chosen Yaro Starak's new website, BlogMasterMind, to make these two points in more detail.
Bear in mind that I have nothing pro or con to say about Yaro Starak's BlogMasterMind website. I am simply analyzing the content of the website for compliance.
What does the California Seller Assisted Marketing Plans Act require, if you are selling to California residents?
"The law, California Civil Code Section 1812.200 et seq., requires Seller Assisted Marketing Plans (SAMPs) to register with the Attorney General's Office, to provide significant disclosure statements to potential buyers prior to signing any contracts, and to provide the buyer specific contractual rights after a purchase has been made."
So, does Yaro have to register and provide a disclosure document? Well, let's review the elements of a SAMP.
Roughly, if you sell any product or services that costs between $500 and $50,000, and Yaro either:
- (1) Represented that the purchaser will earn, is likely to earn, or can earn an amount in excess of the initial payment paid by the purchaser for participation in the Seller Assisted Marketing Plan.
- (2) Represented that there is a market for the product, equipment, supplies, or services, or any product marketed by the user of the product, equipment, supplies, or services sold or leased or offered for sale or lease to the purchaser by the seller, or anything, be it tangible or intangible, made, produced, fabricated, grown, bred, modified, or developed by the purchaser using, in whole or in part, the product, supplies, equipment, or services which were sold or leased or offered for sale or lease to the purchaser by the Seller Assisted Marketing Plan seller.
then Yaro may be a SAMP, who needs to register and disclose. At the very least, Yaro should get expert legal advice on this matter.
Now, let's turn to the new FTC Rule on Testimonials. On Yaro's pitch page, he states that he is going to show you:
The precise model I used to create several $100,000+ a year memberships, formulated into an easy-to-follow method I'll reveal to you - for FREE.
But, he then takes away this representation about earnings on Yaro's terms and conditions page, where he says:
"I do not guarantee any income or result whatsoever as a result of your participation in Blog Mastermind. I provide the tools and education, you are responsible for your results."
The problem here is that Yaro Starak probably has no idea about how much the typical consumer of his program earns, and so there is no safe harbor for the original earnings representation provided by the disclaimer.
I have chose Yaro Starak's program, and I could chose many others, precisely because it likely contains decent contain, worth the price, and is recommended by many seasoned marketers.
But, he is likely outside of compliance both the California SAMP Act, and the FTC Rule.
Is your internet marketing program in compliance? If not, what are you going to do about it? Email me at michael (at) bizop.ca for further help.
I would be happy to assist you with more research on SMC, what do you suggest?
I have a question to ask about the company SMC (Specialty Merchandising Corporation. They overcharged me by over 1200 dollars for what they swore was not a scam but a legitamite business opportunity working from home. Have you ever dealt with similar cases with this company and what is your take on the business recovery services and the fact that they are charging over 200 dollars to send the correct letters to the correct people. With all due respect I would really like to know how you sleep at night knowing how vulnerable americans are at this time and knowing about the bastards who are scamming them and not fighting harder! I understand that you have other agendas to attend to, but if you used what you know about these scams, then the american people would no longer be at risk. This is a terrible time. there are very little jobs and thus unemployment is skyrocketing! People want financial security! There companies deserve to lose some money, if they are so rich from whatever it is they came up with, then that's great but what ever happened to business ethics?! I am a college student and my generation is learning that greed and ego are the main cause of white collar crimes. We are being told that just because you can have everything doesn't mean you should. These scammers obviously do not have an business ethics if they continue to broadcast their product as so called not being a scam! Just today I received about 22 different emails from business opportunities and they had the nerve to say that they understood that people are sick and tired of scams, spam, phishing, all of it. They actually said that they weren't a scam, and low and behold I scrolled down to the bottom of the page because honestly I don't even bother to read the stats because its always the same crap. The bottom of the page said to subscribe for a dollar and then when you get to the paypal screen they charge you 97 dollars a month just for their so called help. My experience with SMC has taught me that the so called business coach experts on marketing.. its just a bunch of sales people who make you think that they know what they are talking about! They seek those people who are older and looking for a way to make money so they don't have to worry.. people like my parents. Who just want to be financially stable! These are innocent people who are looking for guidance not to be tricked into spending a ton of money they don't have! The bottom line here is that I understand that money isn't everything, but the damage to your credit score after being scammed plus the company's lack of refund policy and the words 'iron clad' it can keep innocent people from living a fulfilling life, credit scores are extremely important these days no matter what happens with the economy that will unfortunately hold true for a long time. For example I am a 3rd year in college and will be reapplying for loans soon, a poor credit score does not reflect well on that at all. My point is its not words that people want. Its actions! I would love nothing more than to see SMC incriminate themselves for the amount of money they have taken from people. I would appreciate if you would briefly look through all the compliants associated with SMC and Emerchantclub. Again this article was appreciated, but again it is NOT enough.
This is extremely interesting. Especially part 2:
"(2) Represented that there is a market for the product, equipment, supplies, or services, or any product marketed by the user of the product, equipment, supplies, or services sold or leased or offered for sale or lease to the purchaser by the seller, or anything, be it tangible or intangible, made, produced, fabricated, grown, bred, modified, or developed by the purchaser using, in whole or in part, the product, supplies, equipment, or services which were sold or leased or offered for sale or lease to the purchaser by the Seller Assisted Marketing Plan seller."
I just read the Washington Specific information here:
http://www.dfi.wa.gov/sd/publications/business_opportunity/what_is_a_business_opportunity.htm
And is seems alarmingly clear that if the other States are similar that there are likely a lot of coaching programs violating business opportunity filing requirements and laws as you've pointed out.
I think most of us - including myself - have been under the impression that the seller of a business opportunity had to also provide the actual product or service that the buyer would end up selling.
But clearly that is NOT what this phrase is saying:
"or any product marketed by the user of the product, equipment, supplies, or services sold or leased or offered for sale or lease to the purchaser by the seller"
So I take that to mean that even if *I* find the product or service to sell as the buyer but am relying up a system or training bought from someone else that has a price-point above a certain dollar threshold - it doesn't matter if the seller of the business opportunity has any control over what I ultimately sell.
Amazing. Thank you for explaining this Michael. I'm sure this is going to lead to some interesting discussions.